The corporate veil in wedlock – Supreme Court decides Petrodel v Prest on the basis of trust

Update 21 September 2016. For an application in the environment field, see [2016] EWCA Crim 1043 R v Powell and Westwood and analysis by Robert Biddlecombe, who brought the case to my attention.

Postscript 21 September 2015: Petrodel was applied by the High Court in Wood v Baker. The corporate veil was pierced in a bankruptcy case.

I noted in my post on Eni that the waters remain deep in national law re piercing the corporate veil. Point made by the Supreme Court on 12 June 2013, in Petrodel v Prest (a matrimonial assets case which was decided on the basis of trust), where Lord Neuberger stated obiter  “if piercing the corporate veil has any role to play, it is in connection with evasion”.

Lord Sumption’s take was “there is a limited principle of English law which applies when a person is under an existing legal obligation…which he deliberately evades or whose enforcement he deliberately frustrates by interposing a company under his control. The court may then pierce the corporate veil for the purpose, and only for the purpose, of depriving the company or its controller of the advantage that they would otherwise have obtained by the company’s separate legal personality“. He added ‘The principle is properly described as a limited one, because in almost every case where the test is satisfied, the facts will in practice disclose a legal relationship between the company and its controller which will make it unnecessary to pierce the corporate veil.’

Lord Clarke, agreeing with Lord Mance and others, stated “the situations in which piercing the corporate veil may be available as a fall-back are likely to be very rare”.

The focus in the UK is very much a presumption against piercing the veil and leaving the distinct nature of corporations intact – consequently a high burden of proof for those wishing to pierce.

Geert.

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